Investors behaviour towards insurance and likeliness in investing in IDBI

By

Sashidhar N J (MBA13076)

Industry Background

The insurance industry of India consists of 51 insurance companies of which 24 are in life insurance business and 27 are non-life insurers.

Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company.

Insurance is a Rs. 400 billion business in India and together with banking services adds about 7% to India’s GDP.

Amongst the emerging economies, India is one of the least insured countries but the potential for further growth is phenomenal.

India is one of the least insured countries.

Source- 1) Insurance Regulatory And Development Authority, India2) World insurance report 2013 by Capgemini

Company BackgroundIDBI Federal Life Insurance is a joint venture between three major financial organizations

IDBI bank Ltd.- 48% share

Federal bank- 26% share

Ageas- 26% share

IDBI federal life insurance co. Ltd

Products Offered

Life insurance

Childsurance Incomesurance

Microsurance

IDBI says, “how do I increase my sales?”

1) Investors behaviour towards

insurance2) likeliness in

investing in IDBI

Components of the MR problem-

1) Consumers expectation

2) Risk 3) Factors 4) substitutes

Market Researcher’s Problem:

Research Design

Exploratory

Netnography

Depth InterviewsExpert Interviews

Descriptive

Netnography

Surveys

Insurance in India- • India is a country where the average selling of life

insurance policies is still lower than many western and Asian countries.

• Indian consumers do not trust on many companies and the major population of India do not have any life insurance policy.

• In India, insurance is viewed largely as a tax-saving instrument

insurance policy is gold when it comes to risk protection…

Things get a little murkier in the region of insurance as investment..

Secondary Research

Source- 1) world insurance report 2013, Capgemini2) An article on www.moneycontrol.com

Interesting Insights

Insurance is the most preferred investment alternative followed by fixed deposits and mutual funds, shares being the least.

People feel that safety is extremely important in an investment.

The most desired insurance plan is life insurance. Also, retirement plan is more desired than education plan.

Company image has been ranked as the top factor for deciding any insurance policy with a company.

The most preferable insurance company is LIC followed by ICICI and HDFC.

Unfortunately insurance is a poor performer when compared other traditional modes of investment

Source- International Journal for Research in Management and Pharmacy (IJRMP)

Exploratory Research- Depth Interviews

No of respondents- 10Duration- 15-20minLocation- HyderabadRespondents- households

Basket of insights- Insurance is mostly used as a tool to

protect the insurers family. but when it comes to investment people aren’t much interested.

There aren’t much schemes in insurance for investments as said by the respondents.

There are a lot of substitutes when it comes to investment, such as mutual funds, the traditional bank deposits, gold and silver, shares and real estate.

Insurance is a burn in the pocket

There aren’t much schemes in insurance

(Please go away, I don’t need anything)

They believe that insurance is burn in the pocket, as many do it because sometimes they have to.

When asked about IDBI federal, many of them haven’t heard about it possibly due to lack of promotions.

Therefore, naturally no one would suggest IDBI Federal to any of their family or friends as they will go with the existing company.

In insurance once a company gets a customer, customer is likely to be loyal.

Continued..

Many haven’t heard about IDBI federal

Lack of promotions

Exploratory Research- Expert Interviews

Delphi 1 Delphi 2

Name- manish chauhanOwner- jagoinvestor.com

Name- basavaraj tonagattiOwner- basunivesh.comHe is a certified financial planner

Insights • Insurance is a great option for investments as

there isn’t much risk involved. But it is better not to see it as a pure investment.

• There are better options to invest if only invested for returns.

• IDBI isn’t trusted by people. Moreover, they need to do a lot of promotions to be known among people.

• People most often ask suggestions for an insurance plan for around 25 years and are more keen on taking up a life insurance plan.

• IDBI needs innovative products.

Exploratory Research-Netnography

People see insurance mainly as a risk aversion but then few see it as an investment. Those who see insurance as an investment are asking for suggestions to cover up housing loans.

Almost all them are looking for a policy that lasts at least 25 years.

All of these people are planning for an insurance to protect their family.

Minimum premium observed is 25000. Interestingly most of them preferred LIC even though the

premiums are costly compared to other private players. This clearly shows that company image is a crucial factor.

There is no trace of IDBI Federal life insurance co.

Observed over 15 blogs and websites

Observed over 1000 comments

..\websites and blogs.docx

The Road To Survey• Insurance is mostly used as a tool to protect the insurers

family. but when it comes to investment people aren’t much interested.

• IDBI federal isn’t much known.

Depth Interviews

• Insurance is a great option for investments as there isn’t much risk involved. But it is better not to see it as a pure investment.

• IDBI isn’t trusted by people. Moreover, they need to do a lot of promotions to be known among people.

Expert Interviews

• Interestingly most of them preferred LIC even though the premiums are costly compared to other private players. This clearly shows that company image is a crucial factor.

• There is no trace of IDBI Federal life insurance co.

Netnography

Sampling• Sampling method – Non-probability sampling• Sampling on purpose – Based on the demographic

variables• Sample size- 91 • Location- Hyderabad• Time spend with each respondent- 20 min approx.

..\IDBI survey.xlsx

..\Questions asked.docx

Demographics of sample

Descriptive research

Inference

Out of those who answered around 70% own an insurance policy. Although the sampling done is random, secondary data shows that only a very few of the Indian population owns an insurance policy.

This means that these are people largely from tier 1 cities and some parts of tier 2 cities and almost none from the rural population.

Among the people who own an insurance policy around 55% own a life insurance policy, while only 10% own a health insurance. This suggests are people are more concerned about their family’s safety.

Among those who owned an insurance policy around 57% said it was from LIC, while only 15% come from other companies. This clearly shows a dominance in this field.

As predicted earlier majority of the people said that they

feel insurance is a safety cover for their family. Whereas only less than 10% feel that it makes life after retirement easier.

Continued..

Choose the top three options of investments as to which one would you opt for when you want a safety cover for your future and family?

Inference• Most chosen option amongst the possible

investment options is insurance. • Where as the least chosen option is shares. • This clearly shows that risk is an important factor

and people aren’t ready to take any risks in investments.

• Although real estate is seen as a great option only a few of them said they would like to invest in it. This also shows that risk is certainly a factor.

• Final word- insurance is the most trusted option when it comes to protection of family.

A l l o t t i n g 2 0L a k h R u p e e s i n i n v e s t m e n t s

Inference People invested the most in insurance. This shows the trust

factor and low risk.

As observed people invested the least in shares. This shows risk.

An interesting thing is that most of them who invested in insurance have put only 0-5 lakhs of money. Which clearly shows that people are interested to invest only the said amount.

Also, as expected the second most invested option is bank deposits, which has no risk involved at all.

Ironically real estate has been given a fair amount of investment.

Yet again most of them preferred to invest in insurance for one or the other reason

Insurance and bank deposits are seen as the cheapest mode of investment with satisfactory returns. It has been proved again that risk is a very important factor.

Almost over 60% said that investing in insurance isn’t risky. Where as 30% are neutral.

Paired Sample t-Test

Hypothesis- When it comes to safety for the future and family, insurance policy as an option is more opted by the investors than bank deposits.

Confidence interval- 95%, alpha- 0.05

Sig. = 0.717

Therefore the sig. value is greater than alpha, failed to reject hypothesis.

Cross tabs based on gender

Most of the men think that investing in insurance is a safety cover for them and their family where as women think that it will cover all their expenses when in danger, which is also protection. But none of them thought about retirement.

Most of the men said that they prefer to invest in insurance over other alternatives. Where as women think other wise which is ironic.

Men strongly feel that investing in insurance is better than investing in gold where as women think other wise.

Men agree that investing in insurance is better than investing in real estate where as ironically women don’t agree to this even after knowing that there is a risk involved in investing in real estate.

Investing in insurance is better than investing in chit funds, women strongly feel. But then men remain neutral.

Investing in insurance is definitely not better that investing in bank deposits. Both men and women agree to it.

Both men and women agree to the fact that capital growth is important.

Both men and women say that company profile and image is an extremely important factor.

Summary • Insurance is the most trusted investment option

when it comes to protection and safety, where as it isn’t a great option to see it only as an investment.

• Risk and company image are the important factors that a person sees while investing.

• There’s absolutely no penetration of insurance companies into the rural areas.

• Most of the people bought insurance from LIC.• Most of them did not want to suggest IDBI to their

friends and family, also the experts didn’t want to suggest IDBI as they feel that right now people don’t trust IDBI much.

Suggestions

1) IDBI needs to build trust with the customers.How do I build trust? Word of mouth is a powerful tool for promotions.

For this awareness is very important, as it seems like many of them aren’t aware of IDBI.

How do I spread awareness? IDBI needs to advertise. Internet and social media promotions is quite a

powerful tool. Send emails. Advertise on busy financial and investment blogs.This suggestion is based on the insights from experts and households.

2) It is very important that a customer should have many options to choose from, as different customer has different demands. What do I do then? If at all IDBI wants to be the best in the field they

will have to introduce more schemes as the present schemes are minimum when compared to other players. (this has been suggested by many people)

Please give an example. IDBI doesn’t have a monthly payment option.

Moreover, customers nowadays are comparing policies.

This suggestion is based on the interviews with households.

3) IDBI could recruit interns to find the right advertising strategy and work on digital marketing rather than concentrating only on sales.What would that do? This would help them improve awareness.

This suggestion is based on my observation on the internet

Challenges faced..

• Many of them weren’t interested in answering the survey.

• I was treated as a typical salesman. • Many of them have taken 20 min to answer the

survey and an extra 20 min to about my college and why have I taken up this work.

What I could have done better..• I could have done better had I not had the

unexpected health issue. • Could have done something related to digital

marketing, but was short in time due to health related issues.

• Could have gone out to rural areas too.

My learning

• The sales man experience.• Learned a lot of things about insurance and its

industry. • Interaction with the experts via email.

Thank you..

Dr. Deepak Gupta ji for his very valuable MR course.

Kannan V, the company mentor.

And of course our very own Shrikanth Kulkarni sir, my mentor.

Questions

THANK YOU